Yellow Corporation History
Overland Park, Kansas 66211
Telephone: (913) 696-6100
Fax: (913) 696-6116
Sales: $3.59 billion (2000)
Stock Exchanges: NASDAQ
NAIC: 48851 Freight Transportation Arrangement ; 484122 General Freight Trucking, Long-Distance, Less Than Truckload
Yellow Corporation makes global commerce work by connecting people, places, and information. That's the reason we exist. There are no limits to where we can go and what we can do.
- Oklahoma City cab driver A.J. Harrell establishes Yellow Transit Company, a trucking operation.
- A.J. Harrell sells Yellow Transit, and the company is renamed Yellow Transit Freight Lines.
- Yellow declares bankruptcy.
- George Powell purchases Yellow Transit.
- Yellow acquires Watson-Wilson Transportation System, doubling its size.
- Company changes its name to Yellow Freight System.
- Yellow enters the regional less-than-truckload (LTL) market with the purchase of Preston Trucking Company.
- Yellow Freight restructures into a holding company, changing its name to Yellow Corporation.
- A. Maurice Myers becomes CEO and president of Yellow Corporation, launching the company on a restructuring program.
- Yellow forms global subsidiary YCS International; the company acquires Action Express and sells Preston Trucking.
- Yellow acquires Jevic Transportation; A. Maurice Myers resigns.
- Yellow forms online subsidiary Transportation .com.
Yellow Corporation is a transportation holding company with subsidiaries that specialize in regional, national, and international transportation and related services. Its largest and best known subsidiary, Yellow Freight System, Inc., provides less-than-truckload (LTL) shipping and specialty shipping of heavy loads and chemicals. Through other subsidiaries--including Yellow Global, Saia Motor Freight, and Jevic Transportation--Yellow offers overnight and second-day trucking services and worldwide ocean and air transportation and forwarding services.
1920s-40s: Early Successes, Early Struggles
World War I proved the usefulness and flexibility of trucks in moving large quantities of goods and supplies wherever they were needed on the front lines. Soon after the war, the truck became a fixture in U.S. cities. A.J. Harrell, who ran a bus line and franchise of Yellow Cab in Oklahoma City, recognized the importance and potential profitability of transporting goods rather than people. In 1924, Harrell traded his cabs for trucks and established the Yellow Transit trucking company.
The initial years of Yellow Transit were limited to local and short-run less-than-truckload (LTL) shipments, that is, shipments of less than 10,000 pounds, in Oklahoma City and the surrounding area, and between Oklahoma City and Tulsa. The roadway system in the United States, originally built for travel by horse and carriage, and still barely hardy enough for the automobile, could not yet provide dependable long-distance routes for the far heavier truck. Cities were just recognizing the importance of linking with each other and with their outlying, especially farming, areas. For the time being, the railroads continued to dominate the nation's long-distance, bulk transport freight business. Yet demand for transporting small volume, more fragile, and perishable shipments had begun to grow, and, as the country entered the Great Depression, companies came to appreciate the greater flexibility of trucks. Unlike the railroads, trucks could carry small loads to almost any location at any time, allowing companies to deliver inventory faster than ever before. The collapsing economy had left numerous people without work, many of whom rushed to join the young trucking industry. More and more trucking companies appeared, many comprising little more than a single truck, in the rush to meet the demand. Throughout the 1930s, the trucking industry boomed.
The first highways appeared during this time. Improvements in construction techniques made the new roads faster and stronger, and an early, crude highway system connected longer distances. Advancements in automotive technology, and particularly the perfection of the powerful and efficient diesel engine, made long-distance hauling not only more attractive, but practical as well. Yellow Transit soon expanded beyond its local routes into state-to-state shipping, reaching south into Texas and north into Missouri. By confining itself largely to north-south routes, Yellow avoided direct competition with the primarily east-west orientation of the railroads. Throughout the 1930s, Yellow continued to grow, adding more and more vehicles, routes, and subsidiaries.
Yellow continued to grow through the 1940s, extending operations into Kansas, Illinois, Indiana, Kentucky, and other states. By the end of the decade, Yellow operated through 51 small subsidiaries, nearing yearly revenues of $7 million. The trucking industry had begun to mature by then, and the era of small, independent truckers was giving way to larger, more efficient trucking corporations. Yellow, its growth limited by rising leasing rates, found itself unable to compete and became financially strapped from paying out dividends. A.J. Harrell sold the company in 1944 and, in 1951, it was forced to declare bankruptcy.
1950s-60s: Turnaround and Rapid Expansion
The following year, Yellow was purchased by George E. Powell and other investors. A banker in Kansas City, Powell had also been vice-chairman at Riss & Company, a leading Midwest trucking company. Joining Powell from Riss were his son, George Powell, Jr., and others. Within five months Powell and his team had reorganized Yellow into a more efficient and innovative company, raising it from bankruptcy into the black. Now with bases in Kansas City and Oklahoma City, Yellow turned its focus to long-haul routes, dropping its short-haul businesses. With the post-World War II boom to the economy, and with a new emphasis on cost accounting, customer service, and information flow, Yellow began buying up trucking companies whose routes would allow it to expand into the north and east. The Kansas City operation began to function as a hub to direct the growing network.
A major development in the trucking industry occurred in 1956, when legislation was passed creating the Federal Interstate Highway System (FIHS). With the end of World War II, the demand for automobiles boomed, and dramatic increases in the volume of transported goods would eventually develop trucking, and truck purchases, into a central element in the country's economy. The FIHS was planned to link into every city with a population of 50,000 or more across the United States, calling originally for 40,000 miles but ultimately reaching 45,000 miles. Freeways were to be constructed according to strict specifications and, with their high quality, limited access, and free flow, were ideal for the long-haul trucking industry. The FIHS signaled the nation's commitment to the automobile for serving its transportation and shipping needs. Yellow was quick to capitalize on this latest boost to the trucking industry, and by 1957 had reached revenues of $15 million. In that year, Yellow purchased Michigan Motor Freight Lines, its largest purchase to date, further extending its network of routes across the country.
Meanwhile, advancements in tractor-trailer design were creating lighter, stronger, and more efficient trucks. Because of roadway weight limits, and because of rate regulations fixed by the Interstate Commerce Commission (ICC), new income was attainable primarily through increasing the amount of goods each truck could carry, as well as by cutting costs. The lighter, more efficient trucks and trailers allowed trucking companies to ship larger truckloads at less expense, and Yellow's strategy of continuously investing in the latest truck designs, while ridding itself of outdated vehicles and equipment, allowed it to achieve faster service at lower cost than its competitors. As it outpaced many smaller, older operations, Yellow began a period of aggressive acquisition. These acquisitions were especially important to Yellow's growth. The ICC controlled the creation of truck routes, and in order to extend across the country, Yellow would have had to petition that agency for its desired routes. However, by buying up other trucking companies, Yellow obtained their existing routes and in this way added hundreds of trucking routes to its network. Into the 1960s, Yellow's rapid growth had made it the nation's 13th largest trucker, with annual sales of $40 million.
In 1965, Yellow purchased Watson-Wilson Transportation System, launching a new period in the growth of the company. Watson-Wilson was larger than Yellow, with revenues nearing $70 million per year. More importantly, it controlled routes stretching from Chicago to the West Coast. Nevertheless, the company had not kept up with technology advances and changes in the industry, and by the early 1960s was failing. Yellow's purchase of Watson-Wilson, for approximately $13 million, doubled its size. Subsequent acquisitions of Norwalk Truck Lines and other companies extended Yellow throughout the North and Southeast, bringing Yellow a fully connected, coast-to-coast operation. The company changed its name to Yellow Freight System in 1968 and posted revenues topping $200 million by the end of the decade, making it the nation's third largest trucking company.
1970s: Leading the Industry
An important part of the company's operations were its nine "break-bulk" centers. Serving as hubs along the various legs of Yellow's network, these centers received shipments from one leg, broke down the products according to their following destinations, then loaded the trucks traveling those routes of the network. Break-bulk centers, apart from being labor-intensive, required a high degree of coordination among shipment arrivals and departures in order to achieve maximum speed and efficiency at the lowest cost. Yellow accomplished this with the 1971 installation of a computer-monitoring system, based in the Kansas City command center, placing it at the forefront of the industry. The use of computer technology allowed Yellow to track each shipment precisely, improving information flow within the company and with its customers as well, while gaining a finely tuned coordination of shipment arrivals and departures at its break-bulk centers.
These innovations, and tight discipline, brought the company's operating ratio to among the lowest in the industry. Further acquisitions--of Adley Express in 1973, Republic Freight Systems in 1975, and Braswell Motor Freight in 1977--strengthened its route network into the Pacific Northwest, the Southeast, and throughout the Southwest. By then, Yellow had reached 44 states, operated more than 220 terminals, and, despite dramatic rises in fuel prices since the 1973 Arab oil embargo, sustained an average 32 percent return on equity. During this time, George Powell stepped down as chairman, and his son George, Jr., took over. Despite a misadventure into oil and gas exploration--the company opened Overland Energy Company in 1976, which lost some $60 million by the end of the decade--Yellow underwent a period of sustained growth throughout the 1970s.
1980s-90s: A More Competitive Market
The 1980 deregulation of the trucking industry, amid a wave of deregulation that occurred during the Reagan administration, caught Yellow by surprise. Gone were the restrictions on truck routes, and with it the $34 million per year Yellow earned through licensing fees charged to other companies to use its routes. When deregulation came, Yellow discovered that its terminals, depots, and break-bulk centers had fallen behind advances in the industry, at a time when these facilities had become more crucial to the LTL market than ever before. Yellow's main competitors, Consolidated Freightways and Roadway Express, had gained the edge on both break-bulk handling and broader route systems, each with a wider, larger array of state-of-the-art terminals and depots. By the end of 1981, Yellow had laid off 20 percent of its workers.
Yellow's profits continued to fall through 1983. However, Powell, Jr., and his son, George Powell III, who had entered the family's business some years earlier, began a crash program to upgrade its facilities, converting 17 terminals into additional break-bulk centers in two years. Yellow also increased its LTL freight contracts to encompass nearly two-thirds of its business, and by 1985, Yellow had expanded its number of terminals to 600. The intense competition that followed deregulation closed many trucking companies, and by 1986, Yellow was once again assured of its number three position in the industry. With only Alaska left unrepresented in the United States, Yellow created a terminal there in 1987. As it entered the 1990s, Yellow, now led by George Powell III, turned to international expansion into Mexico, Puerto Rico, and Canada.
Yellow's revenues had passed $2 billion. Yet discounting across the industry, a series of Teamster strikes, higher fuel and labor costs, and a slow softening of the LTL market began to cut into Yellow's profits. Yellow boosted its competitive edge with a series of innovations, including computer software to enable its customers to track their shipments, as well as the introduction of its Metroliner two-day service and its guaranteed Express Lane service, which offered expedited shipments. Yellow entered Mexico in 1991, forming Yellow Freight Mexicana, and further increased its Canadian presence.
Yellow also began to eye entry into the growing regional LTL market, reasoning that its customers wanted a company that could handle both their regional and national needs. In 1992, Yellow bought the ailing Preston Trucking Company, a regional and interregional LTL carrier, for $24 million and the assumption of that company's $116 million in debts and loans. After restructuring, including a temporary 9 percent pay cut to its workers, Preston was profitable again by 1993. The purchase of Preston brought Yellow into the important regional markets of the Northeast and South. However, drivers at both Yellow Freight and Preston were represented by the Teamsters union, leaving Yellow increasingly vulnerable to the threat of strikes. In 1992, Yellow formed a Texas subsidiary, Yellow Transportation, extending its regional business in that important state. Significantly, Yellow Transportation leased its trucks and hired only non-union drivers. In 1993, Yellow Freight restructured as a holding company for its subsidiaries, changing its name to Yellow Corporation. Also in 1993, the company acquired Saia Motor Freight Line, a southern LTL carrier.
Yellow's steady growth had slowed, however, as it entered the mid-1990s. A 24-day Teamster strike in 1994 resulted in more than $25 million in losses for Yellow, while the rough winter of that year further slowed the trucking industry and depressed profits. LTL demand continued to slow, and discounting among truckers became more and more competitive. A 5 percent wage increase instituted in April 1995--a result of 1994's Teamsters strike--further ate into Yellow's earnings, and the company posted a $30 million loss for the year.
In early 1996, with the company floundering, George Powell III resigned from his post as president and CEO. He was replaced by A. Maurice Myers. Myers, previously the president and COO of America West Airlines, had gained a reputation as a "turnaround leader." With Myers at the helm, Yellow wasted little time making changes. Yellow Freight, the company's main subsidiary, was reorganized into five business units, decentralizing decision making and placing a greater emphasis on responding to customers' needs. Almost 250 jobs were eliminated in the restructuring. Even so, 1996's numbers were far from encouraging. With revenues remaining flat, Yellow ended the year with a $27.12 million loss.
But in 1997, the company began to reap the rewards of its cost-reduction efforts; it moved back into the black with year-end income of $52.4 million. In a January 28, 1998 press release, Myers attributed the improvement largely to $145 million in savings at Yellow Freight, and indicated that in the coming year, Yellow Corp. would focus on reducing expenses at its other subsidiaries as well.
Myers's turnaround plan did not consist solely of cost-cutting. He believed that for Yellow to be successful it had to become more flexible and diverse, offering a portfolio of services rather than strictly less-than-truckload shipping. Toward that end, the company spent 1998 and 1999 pursuing expansion both at home and overseas. In June 1998, Yellow formed a new subsidiary--YCS International--to serve as Yellow's international carrier. Through alliances with various international partners, YCS (which was renamed Yellow Global in 2000) allowed the company to offer shippers greater geographic coverage.
Yellow also made two key acquisitions. In 1998, it acquired Action Express, a regional carrier that expanded the company's inter-regional coverage to the Pacific Northwest. A year later, Yellow acquired Jevic Transportation, a regional carrier covering the eastern and midwestern parts of the country. Meanwhile, Yellow rid itself of its struggling subsidiary Preston Trucking. In November 1999, having restored Yellow to profitability, the company's "turnaround CEO," Maurice Myers, resigned. He was replaced by William Zollars, who had served as the president of Yellow Freight since 1996 and had been instrumental in the restructuring at that subsidiary.
Entering a New Century
Yellow began the 21st century in a fitting way--by entering the new economy. In February 2000, the company partnered with two venture capital firms to form Transportation.com, an online transportation management company. Transportation.com provided logistics services such as shipment and inventory management and tracking to small and medium-sized businesses. Yellow believed that its online subsidiary could be a big earner, since it would have a much higher profit margin than the asset-based trucking subsidiaries.
In 2000, Yellow Corporation recorded the best financial performance in its history, with net income of $68 million--a 33 percent increase over the previous year. In 2001, however, a weakening economy caused the company's earnings to decrease significantly. In a June 2001 interview with CNNfn, Yellow CEO Bill Zollars said that the company planned to deal with the downturn by continuing to build broader capabilities, focusing on high-growth global services and looking for ways to reduce expenses until the economy rebounded. Zollars also indicated that much of Yellow's future growth would come from acquisition, as the transportation services industry continued to consolidate.
Principal Subsidiaries: Jevic Transportation, Inc.; Saia Motor Freight Line, Inc.; Yellow Freight System, Inc.; Yellow Global, Inc.; Yellow Technologies, Inc.
Principal Competitors: Arkansas Best Corporation; Consolidated Freightways Corporation; Roadway Corporation.
- Baird, J., "Yellow Quietly Rolls into Texas, Sets up Non-Union Regional Unit," Journal of Commerce and Commercial, August 4, 1992, p. B2.
- Bonney, J., "Yellow Freight Eyes Pacific Rim," American Shipper, January 1995, p. 62.
- "CEO Interview, William Zollars," Wall Street Transcript, January 8, 2001.
- Coletti, R., "Yellow Freight: To the Victor, the Spoils?" Financial World, January 8, 1991, p. 18.
- Isidore, Chris, "Cost Controls Spur Yellow Corp. to an Unexpected Profit," Journal of Commerce and Commercial, April 20, 1995, p. 3B.
- ------, "Yellow, M.S., PST Warn Earnings May Disappoint," Journal of Commerce and Commercial, June 9, 1995, p. B3.
- Lang, Amanda, "Yellow Corp. CEO," CNNfn: Business Unusual, June 6, 2001.
- McCartney, Robert J., "Kansas Firm Agrees to Buy Preston Corp. for $24 Million," Washington Post, November 21, 1992, p. C1.
- "Preston's Quick Turnaround," Distribution, November 1993, p. 18.
- Watson, Rip, "Teamsters Strike Costs 2 Carriers $90 Million," Journal of Commerce and Commercial, June 16, 1994, p. 1A.
- ------, "Yellow Freight Is 1st LTL to Announce Price Rises for '95," Journal of Commerce and Commercial, November 22, 1994.
Source: International Directory of Company Histories, Vol. 45. St. James Press, 2002.